The Mismanagement of Berkshire Hathaway

Berkshire Hathaway, based in Omaha, Nebraska, is a multinational holding company. It is under the expert leadership and guidance of Chief Executive Officer and Chairman Warren Buffet. Buffet is a financial icon who, by 1996, managed to amass a $30 billion investment portfolio for his company. He owns various businesses which include GEICO, Fruit of the Loom, and Dairy Queen, It also has minority holdings in the Heinz Kraft Company, American Express, Wells Fargo and Coca Cola (https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=108542404).

On March 9, 2018 Porter Stansberry of Stansberry Research wrote an article called “The Massive, Hidden Problem at Berkshire Hathaway.” In this article, he made a few controversial accusations against Warren Buffet and his management of his company. He states that Berkshire Hathaway has made a series of investments that are “disastrous” and that this information is being hidden away from the company’s shareholders. He is deeply concerned that the company is being “badly mismanaged.”

It is Porter’s opinion that Warren Buffet took a dramatic departure from investing in and buying companies that were efficient with their capital and instead moved into the banking sector, refer to Stansberry Research. Buffet invested more than $20 million dollars buying the stock of four banks. These financial institutions include Bank of America, Bank of New York, Wells Fargo, and U.S. Bancorp. These companies have produced marginal returns at best.

Porter also mentions that Buffet has invested a major amount of capital into utility companies that have been highly regulated since 2003 says Stansberry Research. These two companies, Berkshire Hathaway Energy and the Burlington Northern Santa Fe railroad will probably be two investments that will require more capital to operate in the future. Porter explains that 44% of Berkshire Hathaway’s after tax earnings was invested into these two utilizes last year. He questions this financial strategy and predicts that Berkshire Hathaway’s capital stream will dwindle in the near future. He stresses that these utilities will soon start generating serious debt for Berkshire Hathaway.